Mortgage Fees
As any loan officer will tell you, almost every borrower is shopping around for the lowest mortgage rate. And why not? Borrowers are supposed to do that, right? But some of these loan officers have been around the block a few times and know how to structure a mortgage rate quote that looks a lot better than it actually is.
I received a phone call recently from a client who told me that while my mortgage rate quote was competitive, there was another mortgage lender who was a lot lower mortgage interest rate. It didn’t surprise me that I my mortgage rate was higher; no mortgage lender can offer the lowest mortgage rates every day. What surprised me was how much lower the home mortgage interest rate was. My home mortgage interest rate quote was a full 3/8 percent higher than my competitor. I scratched my head at that one and called some buddies in the business and asked what their going home mortgage interest rates were. Theirs were similar to mine, yet nowhere near the ultra-low mortgage quote my client had received.
I asked my customer to see if they could get me a copy of the good faith estimate from the other mortgage lender -- in this case a mortgage broker -- to fax to my pricing department for a price concession. If we were that far out of the market we needed to know about it. So the borrower faxed the estimate to me and I immediately noticed a couple of tricks the other loan officer was using.
The most obvious came from the mortgage closing fees. Yes, I was higher with the home mortgage interest rate, but the mortgage lender fees were over $2,350 higher than mine -- on a $190,000 loan. The home mortgage interest rate was indeed lower but there were additional charges like $550 for a "contract administration fee," whatever that is, $450 for underwriting and $500 for processing. In addition there was a broker fee in the amount of $1,375. Seems like a lot of mortgage fees, doesn’t it?
But the mortgage fee quote didn’t stop there. Underneath the mortgage lender/broker charges there were other normal listings for title exam, attorney, title insurance, settlement fees, recording and so on. Normal items, nothing odd about that. Every home sale has similar mortgage fees. The odd part was that the loan fees were much lower than market. Much lower. The attorney fee was quoted as $60. Sixty bucks. I don’t know of any attorney who will even return a phone call for sixty bucks. The title insurance was low-balled along with every other fee item.
Not only that, but there were mortgage loan fees simply not listed on the good faith estimate that should have been there. There was no amount allotted for a property survey when a survey was in fact required for this deal. Even the amount for an appraisal was left blank.
There are two dynamics here and they both involve the mortgage loan fees. By low-balling non-mortgage lender fees it makes the total mortgage closing costs appear lower than they’ll actually be. And by low-balling an home mortgage interest rate and piling on additional mortgage lender or broker fees it makes the home mortgage interest rate look better than it actually is.
I called my client and told her two things: First, please call the title agency and get firm quotes for all the related attorney, title, and other associated fees. She did so and found out what I told her she would find out: Those mortgage fees were being low-balled to make the overall mortgage loan cost of the home loan look better. When she showed up at closing those mortgage fees would have been much higher only to have the broker respond, "I gave you an estimate only, and we have no control over third party charges." Finally, I told my client that I would be more than happy to reduce my home mortgage interest rate by 3/8 percent if I too could charge an additional $2,350 in mortgage fees. It took a couple of seconds before the answer was "no, I’ll take your home mortgage interest rate without all the other junk mortgage fees."
When getting mortgage loan closing cost estimates, remember a couple of things: Non-mortgage lender charges will be what they will be. Just because your mortgage lender quotes you a number for something, make certain you feel comfortable with the quote. If you get several home mortgage interest rate quotes and one mortgage lender seems much lower on non-mortgage lender fees then you know what they’re up to. And if one mortgage lenders home mortgage interest rates seem significantly lower than others, check the mortgage lender fees. You might indeed get a lower home mortgage interest rate, but the additional charges may not make sense to do so.
For more helpful mortgage tips on mortgage fees, mortgage refinancing, home loans, reverse mortgages or a home equity line of credit, contact FreeLoanComparison.com today!
Last update: November 14, 2008
